Shameless plug, but I recently spoke with one of the programmers on 3DO Starblade, Akihito Koriyama. Basically, it uses FMV and 2D graphics. You can read more on my site here. I also made a comparison video between the FMV and in-game footage.

Neat article. I thought it was obvious it was FMV for the backgrounds, but up to now I personally assumed they still used polygons for the interactive objects. They did a damn-convincing job turning them into 2D assets!